A Brief Discussion of the Subjects That Determine the Validity of the Arbitration Agreement in China – from the Perspective of the Relationship between Litigation and Arbitration（Part II）
Tan Siyu

Summary:
The arbitration agreement is the basis for arbitration activities. The dispute over the validity of the arbitration agreement occurs in practice from time to time, and determining such validity involves the allotment of the jurisdiction between the arbitration subject (the arbitration commission or the arbitration tribunal) and the court, as well as the relationship between arbitration and litigation. This article will, from the perspective of the relationship between arbitration and litigation, analyze current effective regulations on the subjects which determine the validity of the arbitration agreement in China, reveal the problems in current legislation, and provide some suggestions for amending current legislation and regulations, hoping to serve as inspiration for the improvement of legislation in China.

Key Words: validity of the arbitration agreement, arbitration subject, relationship between litigation and arbitration

The excessive intervention of the court in determining the validity of the arbitration agreement will have adverse effects on the arbitration. First, it weakens the independence of the arbitration, which contradicts the concept of modern arbitration that arbitration is an independent means to settling disputes and arbitration power is an independent power that makes impartial judgments for disputes. An arbitration agreement indicates the option of the parties to solve disputes they are willing to settle through arbitration. The arbitration tribunal is the organization exercising the arbitration power to settle disputes. Whether the arbitration agreement complies with the legal conditions authorizing the arbitration tribunal to settle the dispute is the key for the arbitral tribunal to exercise its power. If a court is empowered to determine the arbitration jurisdiction, it essentially leads to the dependence of arbitration power on jurisdiction, which weakens the independence of arbitration. Second, it will affect the realization of comparative advantage of arbitration over court. One difference between arbitration and litigation lies in the efficiency of arbitration, and the time limit of arbitration and the single and final ruling system are the reasons why people choose arbitration. If the parties are allowed to take the jurisdiction of the arbitration to the court, it not only lowers the efficiency of the settlement and makes the arbitration lose its comparative advantage, but also gives an opportunity to the party intentionally evading the arbitration and delaying the settlement.

To sum up, the existing provisions of Chinese laws on the determination of the validity of the arbitration agreement have hindered the development of the arbitration system and contradict the modern idea of “support the development of arbitration” and the development trend of the relationship between litigation and arbitration.

III. Suggestions on Legislation

The system of the determination of validity of arbitration agreements should be reconstituted following the trend of “support the development of arbitration” to ensure the independence of arbitration and effectively and properly take advantage of the arbitration and litigation to settle disputes.

The author believes that China could, first, adopt the internationally accepted principle of self-adjudicating jurisdiction of arbitration, to show the efficiency of arbitration; second, stick to the principle of post-supervision by the court to show the independence of arbitration.¹ The core of self-adjudicating jurisdiction of arbitration principle, which is also called “jurisdiction/jurisdiction principle”, is that it is the arbitration tribunal that determines whether it has the jurisdiction over an arbitration case. Although internationally accepted, the arbitration principle of self-adjudicating jurisdiction is of different interpretations in different countries. The main difference lies in whether the determination of the jurisdiction by the arbitration subject is exclusive and final. According to the foregoing analysis of the relationship between litigation and arbitration, the author believes that the self-adjudicating jurisdiction of arbitration has two levels of meaning, i.e. (1) the arbitration subject has the right to judge whether it has the arbitration jurisdiction, including determination of the validity of the arbitration agreement and determination of the objections of the parties to arbitration jurisdiction. A court is prohibited to accept a case filed by either party with regard to determination of the validity of the arbitration agreement. As the subject determining the litigation jurisdiction, the court can only conduct a pro forma review of the arbitration agreement when one party tries to litigate while the other party insists on settlement in accordance with the arbitration agreement. It is beyond the jurisdiction of the court to determine whether the litigation jurisdiction is merited. (2) The decision of the arbitration subject is final.

Based on the above understanding, the author proposes the following suggestions on the amendment of Chinese laws:

1. With regard to the distribution of the power to determine the validity of the arbitration agreement between the arbitration subject and the court, the arbitration subject exclusively enjoys determination of the validity of the arbitration agreement and the court can not intervene in any form. It is not only helpful in preventing the court from excessively intervening in the arbitration process but also in raising the efficiency of the arbitration tribunal. Arbitration aims at the rapid and impartial settlement of cases, and efficiency is its core value. Both the design of the legislative system and the judicial practice shall show respect for the value of efficiency of arbitration to ensure high efficiency of arbitration.

2. After completing the arbitration proceedings and making the ruling, if either party deems the arbitration agreement invalid, the party may appeal to the court to set aside the ruling or refuse to enforce the ruling.
It should be noted that another issue exists with regard to the distribution of the right of arbitration subject, namely whether the jurisdiction over the determination of the validity of arbitration agreement should be exercised by the arbitration committee or the arbitration tribunal. The author believes that the existing provisions in China shall be subject to reform so that the arbitration committee is the only organization to provide a place for arbitration and manage services rather than hear the specific cases. According to the existing Chinese laws, the arbitration committee is responsible for reviewing the validity of the arbitration agreement, but the review often involves substantial issues, so it is unreasonable for the arbitration committee to conduct the review and it is also difficult to maintain impartiality. In practice, once the substantial issues are involved, in most cases, the arbitration committee authorizes the arbitration tribunal to review the validity of the arbitration agreement, which shows that the existing laws have been out of pace with the reality. Therefore, the author suggests that the existing laws be subject to the following amendments:

1. The arbitration committee determines the validity of an arbitration agreement before the constitution of the arbitration tribunal. The arbitration committee only conducts a pro forma review of the arbitration agreement to check whether the arbitration agreement has met the formal requirements and substantial requirements of the Arbitration Law. Once the arbitration agreement is confirmed and the arbitration committee is selected, the arbitration committee shall be deemed to have jurisdiction over the case. If either party deems the arbitration agreement invalid due to fraud and threats, an arbitration tribunal shall be set up after the confirmation of the existence of formal requirements and substantial requirements to judge whether there are fraud and threats and whether the arbitration agreement is valid.

2. After establishment of an arbitration tribunal, the arbitration tribunal will determine the validity of the arbitration agreement. After establishment of an arbitration tribunal, the jurisdiction challenge put forth by the party will be subject to the determination of the arbitration tribunal.

IV Summary

To sum up, the relationship between arbitration and litigation is influencing the operation of the arbitration system. For the subject determined by the arbitration agreement validity, the current legislation system of China reflects the current situation of over-interference of the judicial system in arbitration, disadvantageous not only to the independence of the arbitration system, but also to the perfection and effectiveness of dispute solving mechanisms. Only guided by equal development of arbitration and courts and the support of arbitration’s determination with appropriate supervision by the courts, could a rational arbitration system be established and the arbitration system be full of vitality.

Bibliography:

1. Xie Shisong. Commercial Arbitration Law [M]. Beijing: China University of Political Science and Law Press. 2008.
2. Xiao Jianhua. Arbitration Law [M]. Beijing: China Renmin University Press. 2004.
3. Zhao Jian. Research on Judicial Supervision over International Commercial Arbitration [M]. Beijing Law Press. 2000.
4. Liu Xiqian. A Brief Discussion about the Affirmation Principle of Arbitration Jurisdiction — Self-adjudicating Jurisdiction and Parallel Control [J]. Justice of China, 2011.
5. Wu Fan. Mechanism for Ascertaining the Validity of Arbitration Agreements [J]. Journal of Qiqihar University, 2007.
6. Gao Ya. Validity Affirmation Subject of International Commercial Arbitration Agreement [J]. Truth Seeking, 2005.

1. Qiao Xin. Theoretical Discussion on the Principle of Self-adjudicating Jurisdiction from Comparative Perspective, Western Law Review, P32, 2009 (3).

Disclaimer and Copyright Statement
This article represents the opinion and standing of the author and not that of BAC. BAC will not provide an explanation for any aspect of the content of this article, nor bear any responsibility for actions made in relation to or in reliance on the contents of this article, or opinions presented by any person or unit on the basis of the contents of this article. Unless authorized by BAC in advance, contents of this article shall not be used or reproduced, retained for retrieving, or transmitted or circulated in any form including in video & audio or electronically or mechanically.